Bulletin Board

Claims Report

Several potential claims have been notified to opdu recently.
Outline details of some claims which are of wider interest are as follows:

1. A complaint was made by a scheme beneficiary to the Pensions Ombudsman. The opdu member involved instructed its solicitors to respond to the complaint on its behalf. The costs incurred by the opdu member were paid by the insurer ACE, after allowing for the deductible. Fortunately, the Pensions Ombudsman rejected the complaint. However, if the Pensions Ombudsman had accepted the complaint and awarded compensation to the complainant, that compensation would have been met by ACE under the opdu insurance policy.

2. An opdu member published a booklet for members of a money purchase scheme detailing how various lifestyle options would operate for members reaching the age of 50. About 500 members selected a particular option which was misdescribed in the booklet.

The option was not managed in the way described in the booklet, and if it had been the members selecting that option would have been better off on average by about £1,000. An observant member spotted the discrepancy and presented a claim against the trustees to be compensated for the shortfall. Advice was taken from solicitors who indicated that the trustees were probably liable and obliged to compensate all affected members. The total cost of compensating members was approximately £550,000.

3. This potential claim falls within the scope of the Litigation Costs Extension. One of opdu’s members recently discovered that its actuary had negligently produced a formula for calculating benefits which resulted in approximately 60 individuals receiving too high a pension for about 2 years, substantial overpayments by way of transfer values to other schemes and numerous individuals receiving misquotations. With opdu’s assistance, the member has been in negotiation with the actuary and a favourable settlement is in the process of being negotiated. However, the trustees were advised that if a satisfactory settlement could not be reached with the actuary in the first instance the trustees would have to go to court in order to obtain directions as to how to deal with the beneficiaries. This would have involved representatives being appointed on behalf of different classes of beneficiaries, as well as the sponsoring employer and the trustees and it is usual for the fund to be ordered to pay the costs of all parties. Following conclusion of whatever arrangement might be ordered by the court, there would then have had to have been litigation against the actuary to recover the losses suffered by the fund. Each set of proceedings would have been likely to involve costs substantially in excess of £100,000.

4. One of opdu’s members received conflicting advice from two Counsel as to the interpretation of one sentence in their trust deed. At one stage it was considered that it might be necessary to go to court for the proper construction of the sentence. This matter was resolved but it was estimated that the legal costs would have been about £150,000.